As the editor of the Forbes Statistics Department, I maintain many of our proprietary databases, aggregating and analyzing reams of company and financial data for both print and online features. I also head up numerous lists and reports, including our annual Forbes Global 2000 rankings and the CEO Compensation Report. I joined Forbes as a data collector in the statistics department after graduating from Iona College, and have been running the numbers at Forbes for more than 20 years.

America's Highest Paid CEOs

Our report on executive compensation will only fuel the outrage over corporate greed. In 2011 the chief executives of the 500 biggest companies in the U.S. (as measured by a composite ranking of sales, profits, assets and market value) got a collective pay raise of 16% last year, to $5.2 billion. This compares with a 3% pay raise for the average American worker. The total averages out to $10.5 million apiece. The value realized from exercised stock options and vested stock awards are the main components of total pay, accounting for 61%. The average stock gain was $3.2 million, up from $2.7 last year. Average value of vested stock awards was $3.1 million, up from $2.5 . Combined salary and bonus was up an average 8% to $3.5 million.

Click here to see two decades of CEO pay and how this year’s CEO pay stacks up to past years.

So much for the moral suasion granted to shareholders last year with the first-ever say-on-pay votes for U.S. public companies. A no vote, already a rare thing, is hardly ever binding. You can see the results of our 11th annual long-term look at performance and pay in our bang-for-the-buck scorecard to see who are America’s Best CEOs. We measure the pay of CEOs with at least a six-year tenure against the company’s stock performance versus its peers and the S&P500.

We have 17 female CEOs on our list that run these big firms. The highest paid is Irene Rosenfeld of Kraft Foods with $25.4 million it total pay last year. Kraft recently announced its dividing the company to create two public companies before the end of 2012: a global snacks business and a North American grocery business. It plans to change its corporate name to Mondelez International (global snacks business). The North American grocery company will become Kraft FoodsKraft Foods Group, retaining the Kraft brand.

We also broke down average total pay by industry. Drug and Biotech executives clearly like the direction Obamacare is going and earned the most with $18.3 million. They are followed by media ($17.3 million), household and personal products ($15.7 million), restaurants and leisure ($14.4 million) and consumer durables ($13.8 million). At the low end of the pay scale: Utility CEOs earned $6.1 million, followed by software and services ($6.7 million), banking ($7 million), insurance ($7.9 million) and retailing ($8.4 million).

Compensation data is from the latest available proxy statements filed through Mar. 23, 2012.

Components of Compensation

We count compensation when it turns into cash or marketable stock; we do not include the value of options until the executive exercises them. When calculating a chief executive’s total compensation for the fiscal year we count the following: salary and cash bonuses; other compensation, such as vested stock grants; and stock gains, the value realized by exercised stock options. We collected the latest available compensation figures reported in companies proxies filed by March 25, 2011.

Other: Includes long-term non-equity incentive payouts, the value realized from vesting of restricted stock and performance shares. Also includes other executive personal benefits, such as premiums for supplemental life insurance, annual medical examinations, tax preparation and financial counseling fees, club memberships, security services and the use of corporate aircraft.

Stock gains: Value realized during the fiscal year by exercising vested options granted in previous years. The gain is the difference between the stock price on the date of exercise and the exercise price of the option.

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Hi Wunkman, thanks for your interest in the article. Good question. This group as a whole created plenty of new jobs during their tenure. I cannot put a number to how many jobs. I will say this. Some do a better job than others. Those who do a better job, deserve to paid for it. Those who do not, are not earning their keep. The execs also have to answer to the shareholders to which I say the same thing.

The question to me really isn’t whether they should be paid well for their work, it’s should they be paid as much as they are. Is it really alright for an executive to take out millions in stock options while fighting over a few cents in hourly rates?

I think that for the good of people in this country and the good of companies as a whole, the pay curve needs to have some of the slack pulled out of it. I would conjecture that the existence of people capable of running multinational corporations are much more common than the data shows. Some questions to ask: Who hires the executives? Who decides on executive pay? I think you will find that a large number of people who are on company boards tend to be executives in other companies.

You may also notice that the companies located on the low end of the pay scale seem to be companies that are highly regulated (Utilities, banking), companies that have an above average education level required for entrance (Software and services, insurance). Last you have your retail, which may have something to do with more private ownership, or the level of competition that exists between firms. Retail also would include many ‘mom and pop’ shops that you see, which require very little Kapital investment (Spelling error on purpose).

The top 3 companies seem to be very politically involved, (biotech / drug, media) or requires a high level of Kapital investment but uses a relatively unskilled labor.

Those observations lead me to believe that officers within a corporation either should not receive compensation in the form of stock options, or that the use of a board of directors is no longer viable for the health of a company. Correct me if I’m wrong, but those board members tend to be social elite, very well off people. They tend to not consider the importance of paying your employee’s as much as possible to help drive the economy and keep it healthy.

I would say that the board should rather consist of a group of representatives of laborers. I’m not sure if this would work if said representative was a worker himself, or member of the union. Possibly divide this up geographically and have the laborers elect a person outside the company but is part of the community where the company exists to do so.

I would also say that if any bonus or incentive is giving, the criteria must be clear and concise, and apply to all members of the company. bonuses should be based upon relative GDP output of the company relative to salary, not based upon the general expectancy of the GDP value of the company. Though this would apply to publicly traded companies.

One huge problem in America right now is that we lack investment. Our current kapital is falling apart. Bridges, for example. The United States has a marginal propensity to spend of 90% on average. Current numbers from the Bureau of Labor statistics shows that the average American who makes 35000~ annually or less tends to spend 100% of their income. At $19,090 , the poverty level for a family of 3, the Propensity to consume is well over 100%, closer to 110%.

With that income, all we can do is save it or spend it. It is also a fundamental theory of economics that savings + consumption is equal to your investment + consumption. That means that we are, as a nation, our level of investment is at 10%. This becomes an issue when it comes to technology and education especially. For example, Japan has a Marginal Propensity to Consume of only 70%~. Cultural differences aside, Japan is pretty well thought to have a much higher success with education, and to have a much higher level of technology.

Let me bring this entire tangent back into perspective. The people who are most invested into a company are not the stock holders. They are the workers. Beyond the initial purchase of stock, the company gains no benefit from the trade of stocks. The people who are investing the most into a company are the employees. Some of these laborers wouldn’t even get payed $5 an hour if it weren’t for the labor laws in the United States. When a company does well, nothing changes for them. When the company does not do well, these laborers see pay cuts and pink slips. The Executive officers see stock options and retention checks.

To top it all off, about 60% of money earned at 150k a year earnings is never spent, it is saved or put into investments where there is a higher return rate.

If you are still reading this far into my little rant, god bless ya. I think I’ll try and bring my essay to a close.

Executives have become their own social group. They are out to watch after each other, to scratch each other’s backs. They have lost the benefit of the doubt. This is their own fault. They have proven time and again that they are not capable, in general, of caring for the people that work under them. Anyone can play a trumpet, but only in a band can you create truly powerful music. A single player can show you a feeling, while the band brings out an emotion. The same can be applied to a company. You are nothing without your employees.

Personally, I’ve worked retail for 5 years out of high school, and got to experience their corporate ladder. It was a large, privately owned chain that focused on making each store it’s own individual cell, focused on it’s own profits and margins. Every manager had a goal for % of daily revenue that could be used on payroll and such. If we met these goals, the managers would get a bonus based on a set amount + a percentage of their annual income, which was hourly. If you worked over 2000 hours a year, you received a bonus at 3%-15% of your annual salary depending on how long you worked there. Every level of management had a similar bonus pay scale, and was relative to their own cell, with corporate managers dealing with the issue relative to whether every individual store made their goal. If you don’t know, I’m talking about Menards.

This is one of the best methods of determining wages and incentives that I can think of. Everyone is eligible, regardless of title, even part time employee’s. Most everyone is paid hourly, so that their paycheck is a direct reflection of how much time they worked. How many hours they received was partly up to the discretion of the store management, as each individual department had some control over it’s own schedule. The only rules that come to mind were that full time workers must have at least an average of 38 hours a week, and management must work at least 42 hours a week.

Alright, I’ve ranted about the flaws that i see in the current corporate system. I’ve pointed out some possible correlations with regards to regulation, educational level, kapital investment, and the average rate of executive pay listed in this article. I followed that with a little bit of relationship building between savings and investment, and pointed out that investment (this is investment into our factors of production, Land, Labor, Kapital (with a K because it’s Capital Resources, not money), and Entrepreneurial) is equal to the savings rate. Currently our savings rate is 10%, and so is our investment rate. Personally, I don’t think that it is enough to keep up with the depreciation of our infrastructure, but I have no data relevant to that point. Lastly, I gave an example of how a private retail firm fairly distributes money to it’s employee’s, allowing everyone to have the same bonus structure, and letting it be relative to how much time they had invested.

I missed the part where i suggested it would be much more productive to have the board members of a company be elected representatives of the labor force with some geographical relevance to the location of the workforce.